Auditor flags concerns as Doreen Power’s three plants face closure within Feb 2024

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The independent auditor of Doreen Power Generations and Systems Limited has raised a red flag as three power plants of the company are set to close within February next year because of contract expiry. 

ACNABIN Chartered Accountants, auditor of the publicly listed power producer, expressed its concerns as emphasis of matter in the audited financial report of Doreen Power for the fiscal 2022-23. 

The power plants, each with a capacity of 22 MW, are located at Tangail, Feni and Narsingdi. 

In 2007, Doreen Power and the Bangladesh Power Development Board (BPDB) signed a power purchase agreement (PPA). Under this agreement, Doreen Power's Tangail and Feni power plants were designated to supply electricity to BPDB, each for a tenure of 15 years. 

The contract for the Tangail power plant ended on 11 November of this year, and that for the Feni power plant is set to expire on 15 February 2024.

The PPA for the Narsingdi power plant was inked with the Bangladesh Rural Electrification Board (BREB) in 2007. The contract is supposed to expire on 20 December this year. 

Explaining its position against the auditor's concern in the financial report, Doreen Power stated it applied to the government for the extension of its agreements with the BPDB and BREB. 

The company also mentioned that, considering the extension approval of other companies in the industry, Doreen Power's management does not foresee any significant uncertainties regarding the going concern issue of the company.

Meanwhile, Summit Power informed through a stock exchange filing that the BREB extended the PPA for its three power plants for five years on the condition of "No Electricity, No Payment".

In the last fiscal year, 9.62% of Doreen Power's consolidated revenue and 23% of its consolidated profit came from its three power plants.

Doreen Power has three subsidiaries that have a combined production capacity of 225 MW, where Doreen has nearly 100% stake. 

Therefore, the closure of the three plants won't much affect the company's profit, according to stock market analysts. 

In FY23, Doreen Power's consolidated profit fell 61% year-on-year to Tk64.48 crore owing to foreign exchange losses. The company has recommended an 11% cash dividend for the last fiscal year.

Power companies open letters of credit for importing heavy-fuel oil, a fundamental raw material for power plants, at the prevailing dollar rate. However, they must settle the import bills at a higher rate due to the continued appreciation of the greenback, resulting in exchange losses for these companies, according to an industry insider.

Doreen Power Generations stated in its annual disclosure that the profit decreased due to a significant amount of exchange losses incurred in foreign currency transactions by subsidiary companies, stemming from the substantial devaluation of the taka against the dollar.

To secure shareholders' approval of the dividends and audited financial report, the company will conduct the annual general meeting on 7 December this year.

The company's shares closed at Tk61 each at the Dhaka Stock Exchange on Sunday.